The US government requested last week to modify the bail conditions of Binance founder Zhao Changpeng (CZ) before his sentencing, including requirements to report travel plans and passport custody, but CZ’s lawyers rejected the request. Meanwhile, the US Securities and Exchange Commission (SEC) accused Binance.US of non-compliance in providing crucial information and requested court intervention.
Table of Contents:
1. US government applies to modify CZ’s bail conditions
2. SEC accuses Binance.US of non-compliance in providing crucial information
3. Binance.US revenue plummets 75% after SEC lawsuit
In November last year, Binance reached a historic settlement agreement with the US Department of Justice, the Commodity Futures Trading Commission (CFTC), and other institutions, admitting guilt and agreeing to pay a $4.3 billion fine. Founder Zhao Changpeng (CZ) admitted to violating US anti-money laundering laws and stepped down as CEO of Binance, paying $175 million for bail. However, his multiple requests to return to his home in the United Arab Emirates were rejected by the court.
According to Blockworks, the US government sought to modify CZ’s bail conditions before his sentencing hearing in April. The Department of Justice stated in a court document on the 1st that the US government wants CZ and his defense team to report his travel plans, fearing that as a Canadian citizen, CZ might travel to the US-Canada border. The government also requested that Zhao surrender his Canadian passport to a “third-party custodian employed and supervised by his counsel,” which would prevent him from applying for or receiving a new passport.
However, CZ’s defense team requested the judge to reject the government’s modification order, arguing that CZ’s travel to the US has not been an issue so far. Additionally, the government requested CZ to maintain his residence, but this request was also opposed by CZ’s legal team. The government argued that this is a “standard, commonsense requirement” and that Zhao cannot be exempted.
Despite Binance reaching a settlement agreement with multiple regulatory bodies, including the US Department of Justice and CFTC, which was approved by the court on March 24th, the ongoing lawsuit with the US Securities and Exchange Commission (SEC) remains unresolved. The SEC filed a lawsuit against Binance and Zhao Changpeng in June last year, alleging violations of US securities laws and presenting 13 charges, including operating an unregistered exchange and illegally offering and selling securities to US investors.
According to Cointelegraph, in a court document made public on the 5th, SEC lawyers informed the judge that BAM Trading Services (Binance’s operations in the US under the name Binance.US) has not cooperated with the ongoing investigation and has been “unable or unwilling” to provide sufficient information regarding the custody of customer assets. Therefore, the agency requested court intervention to expedite the evidence-gathering process. SEC lawyers wrote:
“The core of the SEC investigation is whether employees of Binance, which is not an affiliate of Binance.US, retain access to Binance.US customer assets. The SEC claims that Binance.US has failed to demonstrate that Binance globally lacks the ability to access private keys or otherwise access customer assets.”
In its report, Binance.US refuted the SEC’s accusations, stating that it has complied with all “extensive” information requests made by regulatory bodies. The company claimed that the SEC’s demands for information exceeded the scope of the agreed-upon expedited discovery order from June last year and requested the court to end the expedited discovery process.
Binance continues to seek the dismissal of the SEC lawsuit, but the judge has not yet agreed. However, the legal battle with the SEC has left Binance.US in a precarious position.
According to Fortune, Christopher Blodgett, the Chief Operating Officer of Binance.US, revealed in his testimony on Tuesday that due to the SEC’s actions, the company has been forced to lay off over 200 employees since June, accounting for two-thirds of its workforce.
In the document, he described the lawsuit and restraining order as a “near-fatal blow,” weakening the platform’s ability to find partners, including banks and market makers. In the months following the lawsuit, the number of partners decreased from over 20 to less than 5. Since August last year, Binance.US has partnered with MoonPay for USD deposits as its previous payment and banking partners suspended support for the exchange’s USD deposits and withdrawals.
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